The Tatas are close to buy back NTT DOCOMO’s 26.5 per cent stake in Tata Teleservices Ltd (TTSL) at an earlier agreed upon price of Rs.7,250 crore as the Reserve Bank of India (RBI) is understood to have relaxed its fair value pricing norm as a special case to enable them to honour their commitment made to the Japanese company. The easing of norms comes following enhanced business ties between India and Japan.
The RBI’s fair value pricing norm does not allow companies to buy back shares at more price than the fair market value, and this is why the Tata- NTT DOCOMO deal could not be completed despite several notices from NTT DOCOMO and even the Japanese company initiating arbitration proceedings against Tata Sons and TTSL in London to recover its money.
“Tata Sons has made the necessary application to the Reserve Bank of India. The company is awaiting a response,” a Tata Sons spokesperson said while responding to queries.
In March, 2009, NTT DOCOMO had invested $2.22 billion in TTSL to pick up 26.5 per cent stake. The shareholder’s agreement had guaranteed it at least 50 per cent of the investment if it wished to exit in case of TTSL failing to meet certain performance targets.
In April, 2014, the partners agreed to part ways. In July, 2014, NTT DOCOMO exercised its rights, and asked the Tatas to find a buyer for its stake for at least Rs.7,250 crore or a fair market price, whichever is higher. But the Tatas could not meet the obligations as RBI’s rules did not allow such a payment.
